EXCEL International Journal of Multidisciplinary Management Studies

Vol.2 Issue 2, February 2012, ISSN 2249 8834 Online available at http://zenithresearch.org.in/

A STUDY ON INVESTMENT PATTERN IN MUTUAL FUNDS AND PREFERENCE OF RETAIL INVESTORS IN CHENNAI CITY FOR KARVY CONSULTANTS LIMITED, CHENNAI
DR. S. RADHIKA*; MR. K. SRINIVASAN**
*Principal, Vel Tech Ranga Sunku Arts College, Avadi, Chennai 600062 Tamil Nadu, India. **M.Phil Research Scholar, Karpagam University, Coimbatore 641021 Tamil Nadu, India.

ABSTRACT The Indian capital market has made substantial progress during the post-independence period. However, the amount of capital raised in the form of equity and preference shares and debentures by the corporate sector has not been large over a number of years. There has been a raising trend since 1975 but the increase was not all that large. The Indian capital market has grown so sharply in the 80s that the decade itself has been christened as a decade of the capital market. More particularly, during the later part of the eighties, the primary and the secondary markets have grown by leaps and bounds. It is evident from the fact that against an annual average amount of just Rs.90 crores raised from the new issues market in the 70s about Rs.27, 344 crores are being raised during 1992-93. The total capital issues of both the private and public sectors during the years ended 31st March 1991, 1992 and 1993 were Rs.9,683 crores Rs.13,450 crores and Rs.Rs.27,344 crores respectively. The number of public issues has also increased year by year and the total number of public issues of securities for the years ending as on 31st March 1991, 1992 and 1993 aggregate to 335,572 and 1,036 respectively. All these issues were subscribed to by the individual and institutional investors, non-resident Indians, foreign institutional investors and mutual funds, and the public participation was overwhelming and the issues were always oversubscribed a number of times. KEYWORDS: Capital Market, Investors, Mutual Fund, Savings, Pensions. _________________________________________________________________________ 1.0 INTRODUCTION www.zenithresearch.org.in

The main components of capital market are securities market and financial intermediaries. A formal capital market was present in our country from early 1900s.But remained very inactive at that time. The inactiveness of capital market has continued even after independence. The growth of capital market has acquired momentum only from mid eighties. Till then debt instruments were more popular and the investors have not shown much interest in direct investment. Besides the Governments policy towards promotion of capital market was also not much encouraging. Concentration was given to the growth of agricultural sector. The plan for industry-centered growth had been mainly encouraged only for eighties. During mid eighties the foreign collaboration policy of the Government has inspired the industries towards the channel of growth and development. It has been

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Vol.2 Issue 2, February 2012, ISSN 2249 8834 Online available at http://zenithresearch.org.in/

further strengthened by the liberation and privatization measures instituted by the Government as a part of new economic policy. This coupled with the excellent performance of the private sector has made the capital market more active. In tune with the growth in the new issues market during the eighties, the secondary market also expanded fast during this period. The number of stock exchanges has increased from 8 in 1980 to total of 21 in 1993. The membership of the stock exchanges has also increased substantially to around 3,000in 1993 from about 1,200 a decade ago. The listed companies of all stock exchanges stood to above 6,500 in 1993, which were only 2,733 in 1980. The market capitalization has also shown a substantial increase in the eighties. The volume of daily turnover of trade has also increased more than ten-fold over the decade to Rs.250 crores in 1992. On Bombay stock Exchange, the number of dealings per hour put through was as high as 40,000. The paid-up share capital of listed companies in 1980 was Rs.3, 143 crores, while in 1990; the figure was more than Rs.12, 000 crores. The market value of the capital of these limited companies stood at around Rs.3 lack crores in 1992.Besides, the number of joint stock companies at work has increased significantly to 2, 75, 664 with the paid-up capital of Rs.90, 962.2 crores as on 31st March 1993, which was only 56, 493 with the paid-up capital of Rs.14, 607 crores up to 31st March 1980. Investor population has increased from 2 millions in 1980s and reached beyond 10,000 and the number of stock exchanges are 21.In addition to these stock exchanges the NSEIL and OTCEI have been set-up for solving the problem arising in out of the structural weaknesses of our market and provide more transparency in deals and a nationwide network of trade. 2.0 COMPANY PROFILE In 1982, a group of Hyderabad based practicing Chartered Accountants started KARVY CONSULTANTS LIMITED with a capital of Rs.1, 50,000 offering auditing and taxation services initially. Later, if forayed in to the registrar and share transfer activities and subsequently into financial services. All along, Karvys strong work ethic and professional background leveraged with information technology enabled it to deliver the quality to the individual. A decade of commitment, professional integrity and vision helped Karvy achieve a leadership position in its field when it handled the largest number of issues ever handled in the history of the Indian stock market in a year. Thereafter Karvy made inroads in to a host of capital market services,-corporate and retail which proved to be a sound business strategy. Today, Karvy has access to millions of Indian share holders, besides companies, banks, financial institutions and regulatory agencies. Over the past one and half decades, Karvy has evolved as a veritable link between industry, finance and people. In January 1998, Karvy became the first depository participant in Andhra Pradesh. An ISO 9002 company, Karvys commitment to quality and retail reach has made it an integrated financial service company. A SEBI Category 1 Registrar, So far, Karvy has handled over 675 ISSUES as registrars to public issues, processed over 52 million applications and is servicing over 16 million investors from various locations spread over 205 clients.

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EXCEL International Journal of Multidisciplinary Management Studies

Vol.2 Issue 2, February 2012, ISSN 2249 8834 Online available at http://zenithresearch.org.in/

3.0 KARVY GROUP OF COMPANIES 3.1 KARVY CONSULTANTS LIMITED Transfer agency service for corporate and mutual funds Registrar for IPO/Book building Depository participant services Registered with both NSDL/CDSL IT enabled services-MT/Call center/data classification Karvy .com a comprehensive financial advisory site 3.2 KARVY INVESTOR SERVICES LIMITED Merchant banking and corporate financing Distribution of fixed income and other financial products 3.3 KARVY SECURITIES LIMITED Distribution of equity and other financial products 3.4 KARVY STOCK BROKING LIMITED Secondary market trading Member National Stock Exchange(NSE) Trading through BSE 3.5 MILESTONES 1979- Like minded team of financial services professionals 1982- Technology to change service delivery process www.zenithresearch.org.in 1985- Entry as registrars 1990- Entry in to retail stock broking 1992- Set up investor service centers 1993- Financial product distribution 1994- Entry in to mutual fund services 1995- Corporate finance and investment banking 1996- Investment by jar dine Fleming

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Vol.2 Issue 2, February 2012, ISSN 2249 8834 Online available at http://zenithresearch.org.in/

1997- Electronic study 1999- Global IT services (Medical Transcription, etc ;) 2000-E-Biz: Web initiatives 2002- Call centers. 3.6 KARVY NETWORK Branches 65 ISCS 14 Karvy investor points 5500 Sub-Broker/agent Network 4.0 OBJECTIVES OF THE STUDY 4.1 To find out : The preference of investor towards various investment avenues. The most popular investment avenues recalled. The purpose of investment and frequency of investment. The investors risk profile. The approximate percentage of Investing and approximate percentage of savings in mutual funds. The objective of investment and preference of advice while investing. The public awareness on mutual funds. The preference towards the mutual fund sector. The mostly preferred mutual fund schemes. The factors considered while making a mutual fund investment. To find out the satisfaction level of services provided by mutual funds agents. 4.2 To probe the influence of demographic factors such as Income, Age, Gender, Education, Occupation on Investment Avenues. 5.0 SCOPE OF THE STUDY The scope of the study is to analyze and interpret the investment pattern and preference of various Investment avenues, and finding the relationship between the www.zenithresearch.org.in

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Vol.2 Issue 2, February 2012, ISSN 2249 8834 Online available at http://zenithresearch.org.in/

personal profile and financial profile (e.g.: Any Association between the Annual income and The Purpose of Investment). Analyze and interpret the factors affecting the choice of Mutual Fund, and investor preference towards the various Mutual Fund schemes and preference of Mutual Fund Sector. The Scope of the study involves collecting the data from the investors regarding the: 1. Current Investment Avenue 2. Risk Profile of investors 3. Objective of Investment 4. Purpose of Investment 5. Objective of Investment and 6. Preference of Advice of Investors. 6.0 RESEARCH METHODOLOGY 1 Research Design Descriptive Research The Population of the project consists of the entire population of Chennai city excluding the student community. Cluster Simple Random Sampling 240 Salaried, Business Man, Professional, Retired and Others like House wifes etc Primary and Secondary Data Collection Questionnaire www.zenithresearch.org.in

Population

3 4 5 6 7

Sample Technique Sample Size Sampling Unit Data Collection Data Collection Tools

TOOLS USED Simple Percentage Analysis Chi-Square Test Ranking Method

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Vol.2 Issue 2, February 2012, ISSN 2249 8834 Online available at http://zenithresearch.org.in/

7.0 ANALYSIS & FINDINGS TABLE 2. ANALYSIS BASED ON PERSONAL PROFILE AND FINANCIAL PROFILE Financial Profile Purpose of Investment Frequency of Investment ASS NAS ASS NAS ASS Risk Profile NAS App. Percentage of Investing App. Percentage of Savings MF Objectives of Investment Preference of Advice ASS NAS ASS NAS ASS NAS ASS NAS ASS Investors of MF Preference of MF Sector Preference of MF Scheme NAS ASS NAS ASS NAS NAS ASS NAS ASS NAS NAS ASS NAS ASS ASS ASS ASS NAS NAS ASS www.zenithresearch.org.in PERSONAL PROFILE GEN AGE EDU NAS AI ASS FINANCIAL PROFILE APP. FREQ RISK ASS ASS MF ASS SEC SCH ASS ASS

NAS NAS ASS

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Vol.2 Issue 2, February 2012, ISSN 2249 8834 Online available at http://zenithresearch.org.in/

Note: * ASS: ASSOCIATION * NAS: NOT ASSOCIATION QUALIFICATION AI

GEN : GENDER EDU : : ANNUAL INCOME EDUCATIONAL

FREQ : FREQUENCY OF INVESTMENT MF SEC SCH APP : INVESTORS OF MUTUAL FUND : PREFERENCE OF MUTUAL FUND SECTOR : PREFERECNE OF MUTUAL FUND SCHEME : APP. PERCENTAGE OF INVESTING

7.1 STATISTICAL EVIDENCE (CHI-SQUARE TEST) HAS REVEALED THE FOLLOWING FINDINGS ANALYSIS BASED ON PERSONAL PROFILE AND FINANCIAL PROFILE Gender, age and education have a significant relationship with the objective of the investment. The frequency of investment in mutual fund has a significant relationship with risk profile & investors in mutual funds. The risk profile of the respondents has a significant association with preference for mutual fund sector and mutual fund schemes. There is a significant association between age and preference for mutual fund scheme. There is a significant relationship between annual income and purpose of investment, risk profile and approximate percentage of investing. ANALYSIS BASED ON CURRENT INVESTMENT AVENUES AND PERSONAL & FINANCIAL PROFILE THERE IS A SIGNIFICANT ASSOCIATION BETWEEN THE FOLLOWING Investment in shares and education, annual income, objectives of investment ,purpose of investment, frequency of investment, preference for advice and approximate percentage of investing. Investment in mutual fund and age, education, annual income , objectives of investment, purpose of investment, frequency of investment, preference for advice and approximate percentage of investing. Investment in gold and frequency of investment, preference of advice. www.zenithresearch.org.in

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Vol.2 Issue 2, February 2012, ISSN 2249 8834 Online available at http://zenithresearch.org.in/

Investment in bond and annual income, purpose of investment. Investment in fixed deposit and age, employment, objective of investment and preference for advice. Investment in insurance and age, education, employment, objective of investment and preference of advice. Investment in post office schemes and age & education. Investment in public provident fund and age. To Sum up all Investment in mutual funds, shares, fixed deposit & insurance are dependent on large number of factors. ANALYSIS BASED ON CURRENT INVESTMENT AVENUES AND TABLE 2. PERSONAL & FINANCIAL PROFILE CURRENT INVESTMENT AVENUES P&F PROF NA S ASS NA S ASS NA S ASS NA S ASS NA S ASS SH R NA S ASS NA S ASS ASS MF ASS ASS NA S ASS ASS GOL D NAS NAS NAS NAS NAS BON D NAS NAS NAS ASS NAS FD INS R.ES T NAS ASS NAS ASS NAS POF F ASS ASS NAS NAS NAS PPF ASS NA S NA S www.zenithresearch.org.in NA S NA S -

AGE

ASS ASS NA S ASS -

EDU

EMP

ASS ASS NA S ASS NA S NA S -

AI

OBJ

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PUR

NA S ASS NA S ASS NA S ASS NA S ASS

ASS ASS ASS ASS

ASS ASS ASS ASS

NAS ASS ASS NAS -

ASS NAS NAS NAS -

NA S NA S ASS NA S -

ASS NA S NA S NA S -

NAS NAS NAS ASS

NAS NAS NAS NAS -

NA S NA S NA S NA S -

FREQ

ADV

APP.

Note: * ASS: ASSOCIATION

* NSS: NOT ASSOCIATION

*P & F: PERSONAL & FINANCIAL PROFILE. EDU EMP FUNDS : EDUCATION : EMPLOYMENT SHR MF FD INS : SHARES : MUTUAL : FIXED : INSURANCE

AI : ANNUAL INCOME DEPOSIT OBJ PUR ESTATE FRE OFFICE ADV APP. : OBJECTIVE : PURPOSE OF INVESTMENT : FREQUENCY OF INVESTMENT : PREFERENCE OF ADVICE : APPROXIMATE PERCENTAGE OF INVESTING

R.EST : REAL POFF : POST www.zenithresearch.org.in

7.2 GENERAL FINDINGS The main reason why people invest were future plans (32.5%) and wealth creation (26%) Most of the respondents claimed that they invested on a monthly basis (62%), 29% of the respondents invest 20-30% of their income and 24% of the respondents invest 10-20% of their income.

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The main objectives claimed by the respondents for investing are tax benefits (22%) and safety (23%). Most of the respondents (42%) preferred taking a moderate risk. 45% preferred to get advice from family members and friends, 26% from auditors & consultants. Around 87% were aware of mutual funds and 65% among them have invested in mutual funds. 75% of them those who invested in mutual funds invest 5-10% of their savings. 37% prefer private mutual funds, 32% public mutual funds and 32% prefer both public & private sector mutual funds. 57% of those who have invested in mutual funds have opted for equity scheme. When asked to rank the factors in the choice of mutual funds the rank obtained were as follows: Better annual dividends -1, Capital Appreciation -2, High return compared to other investment -3 Better portfolio management -4, previous year performance -5. More than 90% of the respondents were satisfied with the all kinds of service provided by mutual fund agents. 8.0 SUGGESTIONS AND RECOMMENDATIONS Since safety is the factor, which influence the investors mostly by while making a Particular investment decision, Karvy Consultants Ltd shall project this aspect and shift towards financial products which offer maximum safety. Company shall make the investors aware about all the latest Investment opportunities available, which are less risky. Investor those who invested in post office, fixed Deposit and insurance most of them have not invested in shares, mutual funds and bonds and other investment avenues, the main reason is that investors are not much aware about the latest investment avenues. So Company shall make the investors aware about all investment avenues. The main factors affecting the choice of investment were found to be better annual returns, where as mutual funds are more risk averse and diversified these 2 attributes can project during initial public offering on mutual funds. Through the existing database, based on the income level, new financial products and schemes could be targeted at a particular income category which the company seems suitable.

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Vol.2 Issue 2, February 2012, ISSN 2249 8834 Online available at http://zenithresearch.org.in/

9.0 CONCLUSION The various factors identified in the study provide some valuable input regarding the investors pattern, their preference and Priorities this will guide the organization in designing financial products for the various segments of investors. The buying intent of mutual fund product by a small investor can be due to multiple reasons depending upon the risk return trade off. Due to the reduction in the bank interest rates and high degree of volatility in Indian Stock market, investors are looking at an alternative for their investments, which will provide them higher, returns and also safety to their investments. REFERENCES 1. Hendricks, Darryll, Jayendu Patel, and Richard Zeckhauser, 1993, Hot Hands in Mutual Funds: Short Run Persistence of Relative Performance, 19741988, Journal of Finance, 48(1), 93130. 2. Henriksson, Roy D., 1984, Market Timing and Mutual Fund Performance: An Empirical Investigation, Journal of Business, 57(1), 7396. 3. Henriksson, Roy D., and Robert C. Merton, 1981, On Market Timing and Investment Performance. II. Statistical Procedures for Testing Forecasting Skills, Journal of Business, 54(4), 513534. 4. Ippolito, Richard A., 1989, Efficiency with Costly Information: A Study of Mutual Fund Performance, Quarterly Journal of Economics, 104, 123. 5. Lehmann, Bruce N., and David M. Modest, 1987, Mutual Fund Performance Evaluation: A Comparison of Benchmarks and Benchmark Comparisons, Journal of Finance, 42(2), 233265. 6. Malkiel, Burton G., 1995, Returns from Investing in Equity Mutual Funds 1971 to 1991, Journal of Finance, 50(2), 549572. 7. Roll, Richard R., 1978, Ambiguity When Performance is measured by the Securities Market Line, Journal of Finance, 33, 10511069. www.zenithresearch.org.in 8. Shukla, Ravi K., and Charles A. Trzcinka, 1992, Performance Measurement of Managed Portfolios, Financial Markets, Institutions & Instruments, 1(4), 158. 9. Sharpe, William F., 1966, Mutual Fund Performance, Journal of Business, 39, 119 138. 10. Treynor, Jack L., 1965, How to Rate Management of Investment Funds, Harvard Business Review, 43, 6375. 11. www.mutualfundsindia.com 12. www.investmentz.com 13. www.amfiindia.com

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